Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Equity Bottom-Up

Delta Electronics Thailand  / Equity Bottom-Up

<ul>
<li>Delta Thailand surged 20% since our last trade monitor piece. This was without any significant news and the company received another query from the stock exchange as a result.</li>
<li>Delta Taiwan increased by a higher 22%, thus the extreme valuation mismatch between the two has corrected slightly. Delta Taiwan is still only 0.78x the market cap of Delta Thailand.</li>
<li>Delta Taiwan last week announced the acquisition of a German company that makes components for vehicles. This will strengthen Delta's battery management product portfolio and add client relationships.</li>
</ul>


Delta Thailand surged 20% since our last trade monitor piece. This was without any significant news and the company received another query from the stock exchange as a result.
Delta Taiwan increased by a higher 22%, thus the extreme valuation mismatch between the two has corrected slightly. Delta Taiwan is still only 0.78x the market cap of Delta Thailand.
Delta Taiwan last week announced the acquisition of a German company that makes components for vehicles. This will strengthen Delta's battery management product portfolio and add client relationships.


Delta Taiwan Vs. Thailand Monitor: Delta Thai Surges On No News; When Will SET50 Be Fixed?

<ul>
<li>Delta Thailand has rallied 22.7% from its recent low, despite the local Thai market declining while the Taiwan market rose.</li>
<li>Latest Delta Thailand surge unlikely due to Thai market fund flows or company developments. Delta Taiwan generates 2.5x the net profit with similar growth, yet has a smaller market cap.</li>
<li>Over time, relative pricing should trend in Delta Taiwan's favor as valuations are likely to drive longer-term performance -- Also, should the SET50 Index be fixed? Seems broken.</li>
</ul>


Delta Thailand has rallied 22.7% from its recent low, despite the local Thai market declining while the Taiwan market rose.
Latest Delta Thailand surge unlikely due to Thai market fund flows or company developments. Delta Taiwan generates 2.5x the net profit with similar growth, yet has a smaller market cap.
Over time, relative pricing should trend in Delta Taiwan's favor as valuations are likely to drive longer-term performance -- Also, should the SET50 Index be fixed? Seems broken.


Delta Taiwan Vs. Thailand Monitor: Delta Thai Stages Sharp Rebound; Should SET50 Index Be Fixed?

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>Two thirds of the way through the review period, we see one change for the <a href="https://www.smartkarma.com/entities/stock-exchange-of-thailand-set-50-index" target="_blank" data-smartkarma-citation="entities:31493:1" rel="noopener">SET 50 Index</a> in December with <a href="https://www.smartkarma.com/entities/kce-electronics-pcl" target="_blank" data-smartkarma-citation="entities:1892:1" rel="noopener">KCE Electronics (KCE TB)</a> replacing <a href="https://www.smartkarma.com/entities/ngern-tid-lor-pcl" target="_blank" data-smartkarma-citation="entities:31103:1" rel="noopener">Ngern Tid Lor (TIDLOR TB)</a>. </li>
<li>There is one close change where <a href="https://www.smartkarma.com/entities/i-tail-corp-pcl" target="_blank" data-smartkarma-citation="entities:36428:1" rel="noopener">I-TAIL (ITC TB)</a> could replace <a href="https://www.smartkarma.com/entities/srisawad-corp-pcl" target="_blank" data-smartkarma-citation="entities:9480:1" rel="noopener">Srisawad Power 1979 (SAWAD TB)</a> in the index.</li>
<li>
<a href="https://www.smartkarma.com/entities/delta-electronics-thailand-pcl-98806732-8ac4-42b2-a565-ba32673d1e5a" target="_blank" data-smartkarma-citation="entities:20912:1" rel="noopener">Delta Electronics Thailand (DELTA TB)</a> is unlikely to be deleted while <a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB)</a> fails liquidity and is unlikely to be added.</li>
</ul>


Two thirds of the way through the review period, we see one change for the SET 50 Index in December with KCE Electronics (KCE TB) replacing Ngern Tid Lor (TIDLOR TB). 
There is one close change where I-TAIL (ITC TB) could replace Srisawad Power 1979 (SAWAD TB) in the index.

Delta Electronics Thailand (DELTA TB) is unlikely to be deleted while Berli Jucker (BJC TB) fails liquidity and is unlikely to be added.


SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close

<ul>
<li>We have an Underperform rating for Delta Electronics Taiwan as a single stock trade due to our concerns that its valuation has been inflated by Delta Thailand.</li>
<li>The extreme valuation mismatch between Delta Thailand and Delta Taiwan has corrected to some degree (Delta Thai crashed 23%) but still has a long way to go.</li>
<li>Delta Thailand should be removed from the SET50 Index in our view, the stock could be at risk of just such an action by year end according to precedent.</li>
</ul>


We have an Underperform rating for Delta Electronics Taiwan as a single stock trade due to our concerns that its valuation has been inflated by Delta Thailand.
The extreme valuation mismatch between Delta Thailand and Delta Taiwan has corrected to some degree (Delta Thai crashed 23%) but still has a long way to go.
Delta Thailand should be removed from the SET50 Index in our view, the stock could be at risk of just such an action by year end according to precedent.


Delta Taiwan Vs. Thailand Monitor: Thailand Mismatch Correcting & This Could Pull Down Delta Taiwan

Taiwan Semiconductor (TSMC) - ADR / Equity Bottom-Up

<ul>
<li>This week will have some major earnings data points released. In Taiwan, UMC, Delta, Mediatek, ASE will report among other local names in our coverage.</li>
<li>Samsung &amp; SK Hynix will report this week, providing major insight into the Memory chip space for companies such as Nanya Technology and Micron.</li>
<li>TSMC &amp; ASML results last week indicate that the cycle could be bottoming in 2Q23E for these leading firms... But are we entering a two-track industry recovery?</li>
</ul>


This week will have some major earnings data points released. In Taiwan, UMC, Delta, Mediatek, ASE will report among other local names in our coverage.
Samsung &amp; SK Hynix will report this week, providing major insight into the Memory chip space for companies such as Nanya Technology and Micron.
TSMC &amp; ASML results last week indicate that the cycle could be bottoming in 2Q23E for these leading firms... But are we entering a two-track industry recovery?


Taiwan Tech Weekly: This Is a Major Earnings Week; Are We Entering a 2-Track Semiconductor Recovery?

Thailand

Delta Electronics (Thailand) PCL designs and manufactures electronic equipment. The Company produces power systems for telecommunications, medical equipment, and industrial automation.  Delta also produces fans, electromagnetic interference filters, and solenoids.

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Delta Electronics Thailand (DELTA TB)

Delta Taiwan Vs. Thailand Monitor: Delta Thai Surges On No News; When Will SET50 Be Fixed?

Delta Taiwan last week announced the acquisition of a German company that makes components for vehicles. This will strengthen Delta's battery...

Vincent Fernando, CFA

Delta Taiwan Vs. Thailand Monitor: Delta Thai Stages Sharp Rebound; Should SET50 Index Be Fixed?

We believe a change in SET50 requirements should be in order, to change the rules relating to index inclusion in order to remove this broken index...

Vincent Fernando, CFA

SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close

KCE could replace TIDLOR in the SET50 in Dec. ITC is a close add and could replace SAWAD. The impact on the stocks is big given the index is...

Brian Freitas

Delta Taiwan Vs. Thailand Monitor: Thailand Mismatch Correcting & This Could Pull Down Delta Taiwan

We have an Underperform rating for Delta Electronics Taiwan as a single stock trade due to our concerns that its valuation has been inflated by...

Vincent Fernando, CFA

Taiwan Tech Weekly: This Is a Major Earnings Week; Are We Entering a 2-Track Semiconductor Recovery?

TSMC & ASML results last week indicate that the cycle could be bottoming in 2Q23E for these leading firms... But are we entering a two-track...

Vincent Fernando, CFA

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